Starting out in forex can feel like learning a new language. Between pips, lots, leverage, and spreads — it’s easy to get overwhelmed by all the technical jargon.

But don’t worry. This post is your simple guide to understanding the 10 most important forex terms every beginner needs to know. Once you understand these, everything else becomes easier.

1. Currency Pair
Forex is always traded in pairs — one currency against another. For example:

EUR/USD (Euro vs US Dollar)

GBP/JPY (British Pound vs Japanese Yen)

The first currency is the base, and the second is the quote. If EUR/USD is 1.1000, it means 1 Euro = 1.10 USD.

✅ When you use smart trading tools like VTM AI, it scans multiple currency pairs to detect trade setups automatically, so you don’t have to monitor them all manually.

2. Pip (Point in Percentage)
A pip is the smallest price move a currency pair can make — usually the 4th decimal place.

For example, if EUR/USD moves from 1.1000 to 1.1010, that’s a 10-pip movement.

Understanding pips is key to measuring profit, loss, and setting your stop-loss/take-profit targets.

3. Lot Size
Lot size refers to the number of currency units you’re trading.

1 standard lot = 100,000 units

1 mini lot = 10,000 units

1 micro lot = 1,000 units

Lot size affects how much each pip movement is worth. Beginners often start with micro lots to manage risk.

Tools like VTM AI calculate lot size for you, based on account size and risk level.

4. Leverage
Leverage allows you to control a large position with a small amount of capital.

For example, with 1:100 leverage, a $100 account can control $10,000 worth of currency.

But be careful — leverage amplifies both profits and losses.

💡 Choose a trusted broker like Deriv, which offers flexible leverage options and good margin protection for beginners.

5. Spread
The spread is the difference between the buying (ask) and selling (bid) price of a currency pair.

For example:

EUR/USD buy = 1.1010

EUR/USD sell = 1.1008

Spread = 2 pips

Low spreads mean lower trading costs — something Deriv is known for.

6. Stop Loss (SL)
A stop-loss is an automatic order that closes your trade if it moves against you by a certain amount.

It helps protect your capital and prevents emotional decisions.

Using tools like VTM AI, SL levels are automatically placed using logic and market structure — so you don’t have to guess.

7. Take Profit (TP)
A take-profit is the opposite of a stop-loss — it automatically closes your trade when your desired profit is reached.

This locks in gains and helps you trade with discipline.

VTM AI places TP levels based on clean risk-to-reward logic — typically aiming for a 1:2 R:R.

8. Margin
Margin is the amount of money you need in your account to open and hold a trade.

If your margin is too low and your trade goes against you, your broker may issue a margin call — or close your trade automatically.

This is why money management matters — and why Deriv is preferred by many for its fair margin requirements.

9. Bid and Ask Price
Bid price: The price at which you can sell

Ask price: The price at which you can buy

The difference between the two is the spread.

You’ll always buy at the ask and sell at the bid — this is important when calculating trade costs.

10. Risk-to-Reward Ratio (R:R)
Your R:R ratio tells you how much you’re risking vs. how much you expect to earn.

Example:

Risk = 20 pips

Reward = 40 pips

R:R = 1:2

This is crucial for long-term success. Even with a 50% win rate, a 1:2 R:R makes you profitable.

📌 VTM AI is built on this principle — every trade follows a pre-defined risk-to-reward logic.

✅ Final Thoughts
Forex doesn’t have to be complicated. Once you understand the basic terms, the rest becomes much easier to grasp.

And now that you know the key concepts like pips, leverage, lot size, and stop loss, you’re better prepared to take the next step.

✅ Open a trading account with Deriv
✅ Activate your strategy with VTM AI
✅ Trade smart — not blindly